Key to UK interest rate hike, pay data, still a muddle

Bank of England rate setters meeting this week should be in cordial agreement that Britain’s economy is growing at a decent pace, and that price pressures look mostly in check at the moment.

But when it comes to gauging how quickly slack in the labour market is disappearing – a key question deciding when they should raise interest rates – the surveys look a lot less joined-up.

Two reports on Tuesday were far apart on the issue and underscore just how tough it is to get a grip on one a threat in any economy to future inflation – the pass-through effects from higher wage deals, which tend to feed upon each other.

The BCC said the percentage of services companies trying to hire full-time staff fell to just 57 percent, the lowest share since its data series started in 1997.

But the share trying to recruit part-time staff rose to 40 percent – the highest on record.

Figures under the BoE’s scrutiny include people working part-time who want full-time work, so the BCC survey would seem to chime with BoE Governor Mark Carney’s comments two weeks ago that there may be more slack in the labour market than previously thought.

Britain’s economy is motoring, but until the morass of labour market data becomes something more coherent, BoE policymakers will be scratching their heads at at least a few more meetings yet before deciding to raise interest rates.